Mr Hughes infuriated Liberal Democrat MPs by questioning Charles Kennedy's ability with policy on the eve of his leadership speech, and by predicting that the party could lose six seats to the Conservatives at the next election.
He was attacked for shooting from the hip by Adrian Sanders, the MP for the former Tory seat of Torbay, which he is fighting to retain next time. "Some people speak from the hip and I think Simon is one of those people and then he has to try to explain himself the following day. That may be one of the reasons why he wasn't elected as leader. I'm sure it won't be the last time that he and a number of others of us won't engage our brains before we open our mouths."
Mr Kennedy publicly said he was relaxed about Mr Hughes's remarks, dismissing them as "Simon being Simon". But sources close to Mr Kennedy said it showed Mr Hughes could not be trusted in a high-profile top job in which he would be regularly called upon to speak for the leadership of the party.
Clear differences between the two men opened up during the leadership election, and Mr Hughes scored well among the activists who do not want closer relations with the Labour Government.
In calling into question Mr Kennedy's ability to originate policy, Mr Hughes touched on a raw nerve. Mr Kennedy knows he has yet to prove himself as a hard-working leader, and Paddy Ashdown's warning to the party against being "lazy" might have been directed at his successor.
The leadership decided that it would be inviting controversy to have the outspoken Mr Hughes as Mr Kennedy's deputy and persuaded Alan Beith to stay on in the role. One senior Liberal Democrat spokesman said: "If Charles was not interested in policy, he would have stayed in the Labour Party all those years ago."
Mr Hughes announced that he would not be standing after Mr Beith confirmed that in November he would be seeking another year in the post.
"I said if the vacancy arose I would put my hat in the ring. I said I was happy and available to do that. Alan Beith is one of the two long- serving MPs and Alan has first claim to carry on," Mr Hughes said.
Malcolm Bruce was also confirmed as chairman of the Parliamentary Liberal Democrat Party. Although he was told by Mr Kennedy he would be acting as the "shop steward" of the party, Mr Bruce said he would be playing a more high-profile role, speaking for the party on current affairs programmes such as Newsnight when Mr Kennedy was not available. Mr Bruce is likely to be replaced as Treasury spokesman by Matthew Taylor, Mr Kennedy's campaign manager.
Denying that he had attacked Mr Kennedy, Mr Hughes said he was commenting on the change of leadership style from Mr Ashdown. "Everybody welcomes the change of style. Charles is not the autocratic leader that Paddy was. We love Paddy, but it is a change of style to a more collegiate approach. Those are his [Mr Kennedy's] words."